Lions Gate Drops Avalanche Label

Lions Gate will drop its Avalanche label of genre films after next month's slate of new releases and focus on bringing higher profile box office titles to its other two labels, Trimark Home Video and Studio Home Entertainment.

The move will free the company's limited resources to focus on fewer rental titles that the company hopes will generate higher sales overall, says Ron Schwartz, executive v.p. North American home video.

“Less will be more in this case,” he says. “It's a tremendous opportunity for us as a home entertainment entity to not only raise our profile but increase our sales with fewer releases overall.” The company will go from an average of eight titles a month to between five and seven, Schwartz says.

The elimination of Avalanche “doesn't mean we're going to get away from genre fare or video premieres, but in terms of return on investment we have to look at the best utilization of our resources,” he explains. Avalanche will still exist for DVD and catalog sales, he adds.

The company laid off two Avalanche salespeople, he says, but retained another two in sales. Approximately 20 positions in marketing, distribution and customer service covering all labels will remain with the company and no other staffing changes are anticipated, he adds.

The move means Trimark and Studio will share a release slate — of box office titles such as O, which generated $16 million in theatrical ticket sales, due in February, and Bully in January, from Kids director Larry Clark — with no distinction between the two labels.

“Our goal is to have two very strong healthy labels,” Schwartz says. “We'll have joint sales efforts on O but in the future we'll take a look at our release schedule and make sure both lines have an adequate supply of good pictures. We haven't differentiated between the two and going forward we won't make a distinction.”

Lions Gate also reported second quarter revenues with gains in the studio's four core businesses: 22% in motion pictures, 30% in television, 223% in animation and 14% in studio facilities. Overall, revenues climbed 38% to $92.3 million in Canadian dollars for the quarter ended Sept. 30, while gross profit rose to $42.6 million from $29.5 million in the year-ago quarter. Lions Gate is based in Vancouver, B.C., and Marina del Rey, Calif.

However, the company's net income slid to $200,000 for the quarter, down from $4.9 million in the year-ago period, and EBITDA, or earnings before interest, taxes, amortization and unusual items, dropped $14 million to $4.1 million this year. The company blamed the decline on higher distribution and marketing costs of $25.4 million versus $8.7 million last year for high-profile theatrical and home video releases such as O and Songcatcher.

Mandalay Pictures, however, achieved its first profitable quarter with theatrical hits Enemy at the Gates and The Score, earning Lions Gate a $200,000 return verses a $2.1 million loss from its 45% equity investment in the entertainment company.